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Sri Lanka forex reserves drop to US$4.1bn in March 2021

ECONOMYNEXT – Sri Lanka’s forex reserves dropped to 4.1 billion US dollars in March 2021 from 4,583 million dollars in February, the central bank said as liquidity injections continued.

Sri Lanka’s external sector “remains resilient despite some near term challenges,” the central bank said in its April monetary policy statement where the policy corridor was kept unchanged at 5.5 percent to inject new money overnight and 4.5 percent to withdraw excess liquidity.

The rupee has also fallen below 200 to the US dollar.

“Although the Sri Lankan rupee experienced some volatility recently, the continuation of the existing restrictions on non-essential imports and certain foreign exchange outflows, among others, is expected to help cushion pressures in the domestic foreign exchange market,” the central bank said.

“Gross official reserves were estimated at US dollars 4.1 billion (excluding the swap facility with the PBOC), with an import cover of 3 months, at end March 2021.”

The statement came as the central bank as agent to the Finance Ministry failed to sell 48 percent of a 45 billion rupee Treasuries auction.

During the week more liquidity has been injected through outright bill purchases.

“Meanwhile, the Central Bank and the Government continue to engage with investment and lending partners to secure foreign financing and remain committed to honouring foreign currency debt service obligations on time,” the statement said.

Sri Lanka has said it has already paid 1.2 billion US dollars of 5.8 billion US dollars of maturing dollar denominated loans this year. (Colombo/Apr07/2021)





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